Principles of Microeconomics
Mock Exam
Course Introduction
Principles of Microeconomics introduces students to the fundamental concepts and analytical tools used to understand how individuals, firms, and governments make choices in the face of scarcity. The course covers topics such as supply and demand, market equilibrium, elasticity, consumer and producer behavior, the role of competition and market structure, and the impact of government interventions in markets. Through real-world examples and theoretical frameworks, students learn to critically analyze economic issues and apply microeconomic principles to everyday decision-making.
Recommended Textbook
ECON Micro 2 2nd Edition by William
A. McEachern
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21 Chapters
3947 Verified Questions
3947 Flashcards
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Page 2
Chapter 1: The Art and Science of Economic Analysis
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Economists classify all of the following as capital,except one.Which one is not capital?
A) a $20 bill in a firm's petty cash drawer
B) the building where our economics class meets
C) a plumber's wrench
D) a railroad car
E) a factory
Answer: A
Q2) Because people's wants are unlimited but resources are scarce,
A) only the rich get everything they want
B) choices must be made
C) there will be more services produced than goods
D) people search for spiritual fulfillment rather than material fulfillment
E) poor people never get anything they want
Answer: B
Q3) Ceteris paribus means "other things constant."
A)True
B)False
Answer: True
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Page 3
Chapter 2: Economic Tools and Economics Systems
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185 Flashcards
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Sample Questions
Q1) One of the most centrally planned economies in the world today is found in
A) the United States
B) Germany
C) Canada
D) Japan
E) North Korea
Answer: E
Q2) Adam Smith believed that people's pursuit of their own self-interests
A) tended to promote the general welfare
B) required the government's "invisible hand" to keep the economy running smoothly
C) might cause aggregate demand to be greater than aggregate supply
D) would increase the wealth of a nation,which was the quantity of gold and silver it owned
E) would decrease the wealth of a nation,which was its ability to produce goods and services
Answer: A
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Chapter 3: Economic Decision Makers
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196 Flashcards
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Sample Questions
Q1) Which of the following would not describe two thirds of the for-profit businesses in the United States as measured by sheer number of firms?
A) small retail businesses
B) small service operations
C) part-time home-based businesses
D) small farms
E) multinational corporation
Answer: E
Q2) A public good is one that is supplied to
A) only people who pay for it
B) only people who do not pay for it
C) all people,regardless of whether they pay or not
D) the government from private firms
E) foreign governments from our federal government
Answer: C
Q3) Import restrictions usually benefit domestic producers at the expense of domestic consumers.
A)True
B)False Answer: True
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Chapter 4: Demand, supply, and Markets
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222 Flashcards
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Sample Questions
Q1) When a market is in equilibrium,
A) producers earn profits
B) the minimum possible price is achieved
C) there is no incentive for consumers or producers to change their current behavior
D) excess demand is less than excess supply
E) the maximum possible price is achieved
Q2) An increase in the demand for peanut butter could be caused by a(n)
A) decrease in consumer income
B) increase in the supply of peanut butter
C) decrease in the price of bread
D) drought in Georgia that destroyed 30 percent of the peanut crop
E) decrease in the price of bologna
Q3) Which of the following would most likely increase the supply of college textbooks?
A) five major publishers go out of business
B) paper costs double
C) the wage rate of printers increases
D) producers expect the price to rise in the future
E) technology of book production improves
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6
Chapter 5: Elasticity of Demand and Supply
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238 Flashcards
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Sample Questions
Q1) Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state) if the U.S.demand for wheat is
A) inelastic
B) elastic
C) unit elastic
D) downward sloping
E) perfectly elastic
Q2) Cross-price elasticity measures the responsiveness of the price of good A to a change in the price of good B.
A)True
B)False
Q3) The supply of paintings by Van Gogh is most likely to be
A) of infinite elasticity because supply is limited
B) of high elasticity because supply is limited
C) elastic because the paintings are luxury goods
D) inelastic because supply is limited
E) unit elastic
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Chapter 6: Consumer Choice and Demand
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164 Flashcards
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Sample Questions
Q1) The market demand curve is the sum of individual quantities demanded at each price.
A)True
B)False
Q2) Suppose you have spent your entire budget and,for all the goods you purchase,the marginal utilities per dollar spent are identical.Which of the following is true?
A) You are being irrational.
B) You can increase your utility by reallocating your income.
C) You will reduce your utility if you allocate income in any other way.
D) You are minimizing your marginal utility.
E) You can avoid diminishing marginal utility.
Q3) In Exhibit 6-3,the total utility of consuming three scones is
A) 34
B) 6
C) 22
D) 12
E) 24
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Chapter 7: Production and Cost in the Firm
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202 Flashcards
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Sample Questions
Q1) If the average height in the classroom were 5 feet 10 inches and Patrick Ewing,who is 7 feet tall,came in and sat down,
A) the average height would rise to 7 feet
B) the marginal height would be 5 feet 10 inches
C) the average height would not change
D) the average height would rise somewhat
E) the marginal height would rise
Q2) In Exhibit 7-5,what are variable costs at 15 units of output?
A) $30
B) $10
C) $1
D) $20
E) it is impossible to calculate variable cost unless we know the daily wage
Q3) At the point where diminishing marginal returns set in,the slope of the total product curve is
A) positive and increasing
B) positive and decreasing
C) negative and increasing
D) negative and decreasing
E) constant
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Chapter 8: Perfect Competition
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250 Flashcards
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Sample Questions
Q1) Which of the following firms is most likely to be a perfectly competitive firm?
A) one of the three largest U.S.automakers
B) one of the "Seven Sisters" oil producers
C) a public school operated by the government
D) a soybean farmer
E) a manufacturer of refrigerators
Q2) The demand curve faced by a perfectly competitive firm
A) is the market demand curve
B) slopes downward
C) is perfectly elastic
D) is vertical
E) rises when market supply rises
Q3) Suppose,as a result of a long-run adjustment in a perfectly competitive industry to a change in demand,price and output both rose.Therefore,demand must have _____ in this _____ industry
A) fallen;increasing cost
B) fallen;decreasing cost
C) increased;increasing cost
D) increased;decreasing cost
E) decreased;constant cost
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Chapter 9: Amonopoly
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257 Flashcards
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Sample Questions
Q1) Which of the following is not an example of price discrimination?
A) IBM charges business users of its laser printer more than home users
B) Intel offered faster and slower versions of a computer chip
C) An amusement park charges the same admission fee to local residents and out-of-towners
D) Adobe stripped some features from Photoshop to offer a cheaper version
E) Holders of Nevada driver's licenses pay less to ride the Las Vegas monorail
Q2) A monopolist maximizes total revenue at the quantity where marginal revenue equals zero.
A)True
B)False
Q3) In the short run,how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will
A) lower price to expand revenue possibilities
B) restrict output to extract a higher price from customers
C) maintain the current price if profit is still positive
D) increase plant size to lower marginal cost
E) decrease plant size to lower marginal cost
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Chapter 10: Monopolistic Competition and Oligopoly
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219 Flashcards
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Sample Questions
Q1) The prisoner's dilemma provides an explanation for A) the price wars that sometimes occur in oligopolies
B) the ability of firms in an oligopoly to extract the entire consumer surplus
C) the collusive behavior that sometimes occurs in an oligopoly
D) the failure of firms in non-competitive industries to maximize profits
E) an irrational behavior that occurs in competitive markets
Q2) Monopolistic competition is similar to
A) perfect competition,in that firms face downward-sloping demand curves and earn zero long-run economic profit
B) pure monopoly,in that firms face downward-sloping demand curves and can earn economic profits both in the short run and in the long run
C) perfect competition,in that firms face perfectly elastic demand curves and earn zero long-run economic profit
D) pure monopoly,in that firms can earn economic profits both in the short run and in the long run,and similar to perfect competition,in that firms face perfectly elastic demand curves
E) pure monopoly,in that firms face downward-sloping demand curves,and similar to perfect competition,in that long-run economic profit is zero
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Chapter 11: Resource Markets
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210 Flashcards
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Sample Questions
Q1) Exhibit 11-7 shows data on the production of chocolate candy.If the firm sells chocolate for $3 a pound regardless of the quantity sold,the marginal revenue product of the third worker is
A) $0.60
B) $6
C) $0.30
D) $3
E) $90
Q2) A profit-maximizing firm will hire an additional unit of a resource as long as the
A) marginal product of the resource is greater than the marginal resource cost
B) marginal product of the resource is less than the marginal resource cost
C) marginal revenue product of the resource is greater than the marginal resource cost
D) marginal revenue product of the resource is less than the marginal resource cost
E) price of the resource is less than the marginal resource cost
Q3) An increase in the demand for shoemakers will increase the demand for shoes.
A)True
B)False
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Chapter 12: Labor Markets and Labor Unions
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211 Flashcards
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Sample Questions
Q1) In Exhibit 12-2,which of the following is true at a wage rate of $14?
A) The income effect dominates the substitution effect.
B) The substitution effect dominates the income effect.
C) No labor is supplied.
D) The income effect equals the substitution effect.
E) The supply curve is horizontal.
Q2) Two workers are employed in the same job by the same firm;however,they are paid different wage rates.This could be explained by differences in
A) the income effect
B) the price of the firm's output
C) their marginal products due to differences in ability
D) working conditions
E) risk
Q3) Which of the following would be considered leisure?
A) picking strawberries for your own use
B) running a 10-mile training session
C) studying for a college mathematics class
D) changing the oil and oil filter on your car
E) weeding your garden
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Chapter 13: Capital, interest, and Corporate Finance
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183 Verified Questions
183 Flashcards
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Sample Questions
Q1) A given sum of money received each year for a specific number of years is called a(n)
A) bond
B) perpetuity
C) debt
D) discount
E) annuity
Q2) The federal agency that regulates the New York Stock Exchange is the
A) Securities and Exchange Commission
B) Department of Justice
C) Department of Commerce
D) Federal Reserve Board
E) Department of the Treasury
Q3) If a change in technology improves the marginal productivity of capital,the
A) supply of capital will increase
B) supply of capital will decrease
C) demand for loanable funds will increase
D) demand for loanable funds will decrease
E) supply of loanable funds will increase
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Page 15
Chapter 14: Transaction Costs, imperfect Information, and Market Behavior
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178 Verified Questions
178 Flashcards
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Sample Questions
Q1) Frank wants to buy a used car from Adam.Adam knows the car is a lemon,but he doesn't tell Frank.This is an example of:
A) Natural selection
B) Moral hazard
C) Hidden actions
D) Open-access resources
E) Adverse selection
Q2) An employer-employee relationship is
A) a nonmarket relation
B) a principal-agent relation
C) a comparable worth relation
D) a substitution relation
E) a winner's curse
Q3) The search model predicts that
A) singles bars will be popular
B) computer dating services would reduce the amount of search
C) supermarket price advertisements in the newspaper provide consumers no benefit
D) as a consumer's wage rises,they search more,ceteris paribus
E) common knowledge has no value
Page 16
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Chapter 15: Economic Regulation and Antitrust Policy
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170 Verified Questions
170 Flashcards
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Sample Questions
Q1) The firm in Exhibit 15-4 is a natural monopoly.If a government regulator forces the monopoly to set price equal to marginal cost,the economic profit is:
A) -$2,310
B) $2,310
C) $210
D) -$210
E) -$4,620
Q2) Which of the following is not prohibited by the Clayton Act,even if it reduces competition?
A) merger accomplished through the acquisition of another firm's stock
B) merger accomplished through the acquisition of another firm's assets
C) price discrimination that cannot be justified on the basis of cost differences
D) exclusive dealing contracts
E) interlocking directorates
Q3) Under the rule of reason,no firm with a large market share could be found guilty of violating the Sherman Antitrust Act.
A)True
B)False
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Chapter 16: Public Goods and Public Choice
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119 Flashcards
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Sample Questions
Q1) Populist legislation is legislation where there are both widespread costs and benefits.
A)True
B)False
Q2) The American Association of Retired Persons (AARP) provides checklists summarizing the voting and attendance records of legislators.Which of the following is true?
A) If the AARP's members were rational,it wouldn't have to do this.
B) This policy is useless if AARP members are rationally ignorant.
C) This policy is intended to reduce voters' rational ignorance by decreasing the cost of information.
D) If AARP members read this information,their rational ignorance would be eliminated.
E) If all voters in the nation read this information,their rational ignorance would be eliminated.
Q3) A rise in marginal income tax rates would likely increase the size of the underground economy.
A)True
B)False
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18
Chapter 17: Externalities and the Environment
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187 Flashcards
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Sample Questions
Q1) The economic efficiency approach to emission control provides the polluting firm with
A) a license produce as much emissions as it wants
B) the option of choosing between focusing on profit or cost
C) a process for determining the optimum quantity of emissions
D) more flexibility in selecting the most cost effective method of control
E) a subsidy for producing additional emissions
Q2) According to the Coase theorem,if bargaining costs are small,then there will be an efficient solution to the problem of toxic waste
A) if the creator of the toxic waste is assigned the property rights
B) if the victim of toxic waste is assigned the property rights
C) regardless of which party is assigned the property rights
D) if the property rights are shared equally between the creator and the victim of toxic waste
E) in the form of a pollution tax
Q3) Some U.S.cities still dump raw sewage directly into rivers or oceans.
A)True
B)False
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Chapter 18: Income Distribution and Poverty
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Sample Questions
Q1) Eligibility for income assistance benefits requires a prior financial contribution from the individual covered;eligibility for social insurance programs does not.
A)True
B)False
Q2) The official poverty definition in the U.S.is having an income that
A) provides minimum biological needs
B) is less than three times the cost of a nutritionally adequate yet frugal diet
C) places the household in the bottom 20 percent of the income distribution
D) is less than the average U.S.welfare allowance
E) is approximately equal to the average household income of Canada
Q3) According to a recent five-year survey of U.S.business ownership,the number of black-owned businesses rose
A) 45 percent
B) 450 percent
C) 90 percent
D) 25 percent
E) 4.5 percent
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Chapter 19: International Trade
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161 Flashcards
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Sample Questions
Q1) The basis for international trade is
A) established trade patterns
B) the size of gold holdings of two countries
C) shipping and transportation costs
D) absolute advantage
E) comparative advantage
Q2) In the United States,dumping is
A) encouraged because it lowers prices for consumers
B) prohibited by the Trade Agreement Act of 1979
C) discouraged by domestic consumers who benefit from the lower price
D) encouraged because it encourages competition
E) encouraged because it promotes expenditure on R&D
Q3) The losers when the United States institutes trade restrictions include
A) U.S.consumers of imported goods,U.S.producers who use imported intermediate goods,and,if other countries retaliate,U.S.exporters
B) U.S.producers of goods that compete with imported goods only
C) U.S.consumers of imported goods and U.S.producers of goods that compete with imported goods
D) all U.S.producers of all goods and U.S.exporters
E) only U.S.exporters
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Chapter 20: International Finance
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Sample Questions
Q1) If the U.S.dollar depreciates in the foreign exchange market,American exports will be _____ and American imports will be _____.
A) more expensive;more expensive
B) cheaper;cheaper
C) less expensive;less expensive
D) less expensive;more expensive
E) there will be no change
Q2) If the U.S.dollar appreciates relative to the Brazilian cruzeiro,then
A) the U.S.dollar-cruzeiro exchange rate will increase
B) U.S.goods become less expensive in Brazil
C) Brazilian goods become more expensive in the U.S.
D) Brazilian investors will pay fewer cruzeiros to buy each U.S.dollar
E) the U.S.will import more from Brazil
Q3) Given the hypothetical data in Exhibit 18-1,what is the balance on current account?
A) -$1,500
B) -$2,000
C) -$2,400
D) -$2,420
E) -$2,500
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Page 22
Chapter 21: Developing and Transitional Economies
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Sample Questions
Q1) If the centrally planned economy of Rowboat dismantles central controls before institutions such as property rights are in place,instability will most likely result.
A)True
B)False
Q2) When a developing country relies on export promotion,
A) it concentrates on producing for its domestic market
B) it builds its technological and educational base and then can make more complex products for export
C) domestic producers have sufficient protection that they can afford to become inefficient
D) its government must intervene more in markets
E) None of the answers is correct
Q3) The country of Excludania can discourage foreign investment by
A) requiring foreign investors to find a local partner who must be granted controlling interest
B) setting different exchange rates for different categories of transactions
C) heavily restricting private international borrowing and lending
D) All the answers are correct
E) None of the answers is correct
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Page 23